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Friday, 23 October 2015

Protesters advance towards new positions in Kiev in 2014. Nearly two years after Ukrainian protesters drove out their pro-Russian leader, progress toward building a European-style state has disappointed and the post-Soviet scourge of corruption endures.

Nearly two years after Ukrainian protesters drove out their pro-Russian leader, progress toward building a European-style state has disappointed and the post-Soviet scourge of corruption endures. Allies of the deposed Viktor Yanukovych are bidding to make a comeback.

For French businessman Jean-Noel Reynaud, the situation has led to what he calls an illegal takeover at one of his vodka plants.

“Ukraine isn’t fulfilling its commitments to clean up the country," Reynaud, chief executive officer of Paris-listed Marie Brizard Wine & Spirits, said in a phone interview. “This isn’t acceptable in a nation that’s aspiring to adopt European Union values. This is a black spot on its reputation.”

With the attention of world powers trained to the Middle East, the struggle over Ukraine’s future is shifting away from the battlefield near its border with Russia, as optimism builds that a truce there will hold. Failure to make a dent in graft risks eroding support for the leaders that took charge after the revolution and further damaging confidence in an economy crying out for investment. Local elections on Oct. 25 will be a chance for the nation to deliver a message to the government, with two thirds of Ukrainians saying the country’s heading in the wrong direction.

Unpopular Government

The lack of momentum in revamping Ukraine has shattered support for the ruling coalition, led by President Petro Poroshenko’s party, according to a September poll by the International Republican Institute. Controlling a third of seats in parliament at present, the Solidarity Party would get 13 percent in elections for the legislature, the survey showed. The party of his prime minister, Arseniy Yatsenyuk, ranked in April by one newspaper as Ukraine’s least reform-minded politician, isn’t even contesting the local ballot.

Luckily for Poroshenko, the opposition is divided between populists, nationalists and backers of the former regime, while presidential and parliamentary elections aren’t due until 2019. That distance helps to insulate him from a growing chorus of discontent, which includes businesses that complain officials are resisting change to protect vested interests of corporate allies and oligarchs.

Andrey Pavlichenkov, who manages a $100 million bond fund with investments in Ukraine, has seen no streamlining of the country’s bureaucracy. He said difficulties including raider attacks and overbearing checks by prosecutors and the security service haven’t gone away, and he fears the government isn’t doing enough to make foreign investors return.

Bribe Seeking

“Ukraine isn’t attractive enough as an investment destination that such problems can exist," he said. "Bureaucrats have no idea how to regulate and just look for ways to get a bribe -- the system doesn’t want to change."

Ukraine is relying on an $18 billion restructuring of its foreign debt and $17.5 billion loan from the International Monetary Fund to revive an economy that hasn’t grown since 2013 and help restore confidence in the past year’s second-worst-performing currency, the hryvnia, which has plunged 42 percent against the dollar. Lenders have made the flow of bailout cash contingent on continued reform and inroads into corruption.

The U.S., which has provided $2 billion of loan guarantees on top of the IMF rescue, has been critical of some elements within Ukraine.

"Corrupt actors within the Prosecutor General’s office are making things worse by openly and aggressively undermining reform," Geoffrey Pyatt, the U.S.’s ambassador in Kiev, told a business conference in the the Black Sea port of Odessa last month. "In defiance of Ukraine’s leaders, these bad actors regularly hinder efforts to investigate and prosecute corrupt officials."

‘Oligarchic Clans’

Davit Sakvarelidze, a deputy prosecutor general, says it’s harder to stamp out corruption in Ukraine than his native Georgia, which shot up Transparency International’s rankings under then-President Mikheil Saakashvili. Saakashvili, named this year by Poroshenko as Odessa’s regional governor, has sought to curb corruption in the local customs service, falling out with Yatsenyuk in the process.

"You have a lot of interests, a lot of oligarchic clans that control politicians, members of the government," Sakvarelidze said in an interview. "You have more problems here because everybody tries to lobby his part of the cake.”

While Poroshenko has pledged to reign in tycoons such as Ihor Kolomoyskyy, the president was himself a billionaire when he was elected and hasn’t fulfilled promises to sell off assets that include Ukraine’s largest candy business.

IMF Warning

Ukraine is moving ahead with reforms to eliminate corruption, outsource customs functions to an international company, overhaul courts and sell off state-run companies, according to Boris Lozhkin, Poroshenko’s chief of staff, who said the nation may be enjoying a period of relative peace as President Vladimir Putin seeks to have EU and U.S. sanctions against Russia lifted.

“We’re working on all of these kinds reforms at the same time,” he said Oct. 13 in an interview in his office in Kiev. He said results were more likely next year, when more funds arrive from the EU and the U.S.

While the IMF has praised progress on economic measures, such as creating an anti-corruption agency, it says "significant" challenges remain.

"It is essential to stay the course of reform and, indeed, deepen the effort," IMF managing director Christine Lagarde said last month in a statement.

Reynaud, the French CEO, vows to continue fighting for the factory his company has lost. He’s banking on a positive outcome in local courts having sought help from Poroshenko’s administration and the French embassy in Kiev, which is tracking the case along with the European Commission. But Reynaud has a warning for the nation’s current leaders.

“I hope Ukraine will be able to join the EU one day," he said. "But with these kinds of maneuvers, it can’t.”

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What is my reaction to Ukraine’s attempt to break ties with its Soviet past by banning communist symbols? Well, I do not have one. In common with much of the country, such initiatives leave me neither hot nor cold.

They represent a sideways step. If the government does not introduce radical reforms to change the way society operates we will have taken a step backwards – however many Lenin statues are removed.

The late Ihor Ševčenko, professor of history at Harvard University, warned at the beginning of the 1990s that while it is relatively easy to overcome a Soviet past the question is what to do about the Byzantine influence of centuries of Orthodox Christianity. Ditto the old joke about the plumber who looks like Marx and, in reply to repeated requests from the party to remove his beard, says “Sure, I’ll shave my beard but where shall I put my wisdom?”

President set to sign measures that ban Communist symbols and offer public recognition and payouts for fighters in militias implicated in atrocities

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The interrelationship between communism and our historical and cultural legacy should become an object of study for historians and sociologists. At present, it is being treated flippantly. But deadly as it may be, communism is merely a flower growing on a tree whose roots reach deeper into the past. It can be uprooted only with the help of radical reforms. That is why establishing an independent judiciary is much more important in overcoming the past than banning Soviet symbols.

Ponder this: apart from Latvia, which banned Soviet symbolism as early as 1991, other countries that more or less successfully jettisoned their Soviet pasts got rid of Soviet symbols in the 2000s – after they had carried out radical reforms, not before, or in lieu of. Estonia in 2007, Lithuania in 2008, Poland in 2009. The logic?

First, overcome the past, then deal with its surface manifestations.

In Ukraine, you say, unlike in Poland or the Baltic states, there is a war on, so is fighting for the past not more important as a way of bolstering patriotic spirit? If only.

Out of all Ukraine’s regions, Dnepropetrovsk is most supportive of the military struggle against separatists in the Donbass. But Dnepropetrovsk also registers one of the highest levels of hostility (33.6%) towards Stepan Bandera (the Ukrainian nationalist leader revered by some but considered a fascist and Nazi collaborator by others) of any region in Ukraine, second only to the Donbass (44.6%). Levels of patriotism, then, are linked not so much to historical memory as to a desire to protect oneself, one’s family and one’s loved ones.

Protesters topple a statue of Lenin in Kiev in December 2013, before the government was overthrown. Photograph: Jaap Arriens/Demotix/Corbis

Imagine what Ukraine – its army, economy and standard of living – would look like if former president Viktor Yushchenko had carried out real reforms in 2004 instead of being preoccupied with history. In that case, would Russia have intervened in Ukraine’s affairs?

This year marks 30 years since Mikhail Gorbachev came to power. It is a sad anniversary. For 30 years we have been fighting the past and for 30 years it has defeated us.

Communism is merely a flower growing on a tree whose roots reach deeper into the past

Since some time in the late 1980s I have indulged a selfish dream: to fall asleep and wake up in five years, when everything will have sorted itself out and it will be possible to live a normal life. The irony is that whatever year I would have fallen asleep in and whichever five years I would have slept through, the situation would have stayed the same – just as bad as before.

As a historian I don’t abandon all hope because I know that revolutions start fast but take a long time to bear fruit. It took the English 50 years (from 1640 to 1688) to reach a post-revolutionary equilibrium and the French about 100 years after the revolution of 1789. Likewise the Germans needed a century after 1848, or even 150 years if you count from the fall of the Berlin wall, when a unified Germany became the main driver of a united Europe.

My hope rests on the assumption that under modern conditions, historical time moves faster than it did in the past. Ukraine has also crossed two important frontiers.

First, it emerged from the shadows of empire when it became independent. According to economists, this alone increases by 50% a country’s chances of creating institutions that promote development. Second, the Soviet past burned in the fire of the Euromaidan protests. With each step of this sort we outstrip Russia, which has failed the test of history and faces shocks yet to come.

To step beyond our history we need a large-scale crisis, like the fall of communism or something similar to what we are living through now. Will Ukraine take its chance this time? I cannot say. In history, there are no givens.

But at least there is a chance. It would be a sin to throw that chance away by substituting cosmetic change for real reforms.

IN COLUMNISTS

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In St Petersburg, Russia’s window to the west and the city where I studied Russian close to a decade ago as a student, a new museum has opened up dedicated to Novorossiya, or New Russia, the tsarist-era term for the area of Ukraine that Catherine the Great won from the Ottomans and the Cossacks. Pro-Russia activists declared more than a year ago that the Novorossiya territory, which stretches from Odessa to Kharkiv, should be returned to Russia together with Crimea. Yet this goal has proved more elusive than some expected.

While Vladimir Putin himself was one of the first people to reintroduce the term Novorossiya to the Russian lexicon, using it in a speech last April, the president has since dropped the term from his vocabulary suggesting that Moscow has abandoned any plans to either annex east Ukraine’s Donbass or help it develop into a truly autonomous region.

Against a backdrop of western sanctions and a worsening Russian economy, most people have accepted the reality that east Ukraine will not be re-emerging as part of the Russian empire. But not everybody.

At St Petersburg’s newly christened Novorossiya Museum it is back down the rabbit hole with my two hosts: the Caribbean and a fellow volunteer fighter Sergei. Both were injured fighting in east Ukraine over the past year and are now temporarily back in Russia’s second capital. The Novorossiya Museum has become their go-to hang-out spot. “It’s not just a museum. It’s a meeting place for the rebels,” Sergei explains.

A grizzled firefighter who was born in Soviet Ukraine but grew up in Russia’s far north, Sergei reinvented himself as a rebel soldier last year. His friend the Caribbean is a self-described social activist from St Petersburg whose real name is Konstantin. The nom de guerre, he says, comes from the time he spent stationed on the Caribbean Sea for the Soviets in the 1980s.

Their list of grievances runs long. There are conspiracy theories about the US consumerist cult; the state department official who handed out cookies to Kiev protesters, embodying the witch from Hansel and Gretel; and about Britain, the master manipulator which for decades has used the US as a geopolitical “surgical tool”.

In depth

Some of the complaints are directed against the Baltic countries, which they say lived like royalty during the Soviet period, yet show nothing but ingratitude to their Moscow overlords. “They had marmalade in tubes, electronics, dairy products,” the Caribbean says. “They wanted freedom, but they lived like kings.” Now they are suffering for joining the EU, he claims. “They’re like Detroit. Or New Orleans after the hurricane.”

The two men’s wonderland has come to life in the Novorossiya Museum, proof that although Russian state television may have toned down its anti-Ukraine rhetoric, its visions are living on in the minds of many. Inside, exhibits detail the battles of the past year’s war. The most troublesome focuses on the enemy the rebels are fighting: the people of Kiev and west Ukraine, whom they confusingly claim are the same ethnic people as Russians, but also the ideological descendants of Nazi Germany.

The Caribbean conducts the tour. “Do I need to explain what this cross is? It’s an analogue of the iron fascist cross. We didn’t get this from the rebel side.” He moves on. “This is a fascist helmet!” he says pointing at a display case. “Is this a sign of peacefulness?”

Next to the fascist helmet are fascist suspenders and a package of soup with English lettering on it, proof that the Americans are providing extensive military help to the Ukrainian side, according to Sergei. Dressed in a green camouflage uniform and decked out in his Novorossiya medals, the fighter says he is planning to return to Donetsk for more military action as soon he receives the doctor’s blessing. “People do different things well. Some people can drive well. Some people are good at writing poems,” he posits. “Russians are good at fighting.”

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‘Welcome to the nation state of Ukraine,” says Mustapha Dzhemilev, a diminutive, soft-spoken 71-year-old leader of the Crimean Tatars, gentle on the outside, hard as steel within. He was deported from Crimea on Stalin’s orders in 1944, when he was just six months old, along with so many fellow Tatars. Persecuted under Soviet rule, he went on hunger strike for 303 days. A year ago, after Vladimir Putin’s annexation of Crimea, this quiet fighter was banned from re-entering the peninsula his forebears had inhabited for centuries, long before the Russians did. And now here he is in Kiev, welcoming us to a new Ukraine.

“Putin can win some battles but Ukraine will win the war – with our passion, with our willingness to die,” says Hanna Hopko. For now “we have the political nation”. Hopko, 33, is the chair of the Ukrainian parliament’s foreign affairs committee, one of a vanguard of young female MPs, self-professed heirs to theEuromaidan demonstrations, who now rattle off the details of political transformation plans faster than a rapper on speed.

Two very different life stories, but one and the same message: steely determination that Ukraine should become a sovereign, modern European country.

This is a story we largely miss. In Berlin, Washington or Brussels we say “Ukraine”, but within 30 seconds we are talking about Putin, Nato and the EU. So let us consider, for once, the struggle for Ukraine, by Ukrainians, inside the majority of its territory still actually controlled by Ukraine. Even if there were no war, this would be a daunting task, for there is a breathtaking scale of corruption and oligarchic misrule, which has deformed the state ever since it gained formal independence nearly a quarter of a century ago.

Here is a state so corrupted that those who should be its doctors are its poisoners

The deputy finance minister says the grey or black economy may account for as much as 60% of the country’s economy. One example: we are told that of the 20,000 kiosks that are dotted along the streets of Kiev, selling various goods, only 6,000 are properly registered and pay some taxes. The other 14,000 may pay bribes and protection money, but not taxes. Who controls them? Well, we are told, it’s often public prosecutors (who are numerous, and have extraordinary powers), police officers or judges. Here is a state so intravenously corrupted that those who should be its doctors are its poisoners. Perhaps we might call the radioactive poison in its bloodstream Ukrainium.

At the apex of this arrangement are the oligarchs, usually with regional strongholds. A former investigative journalist turned reformist MP talks matter-of-factly of the “Donetsk clan”: the (Rinat) Akhmetov clan, the (Dmytro) Firtash clan, the (Ihor) Kolomoisky clan, and so on. These oligarchs don’t just own vast chunks of the economy. They bankroll political parties, furnishing blocks of MPs to protect their interests. People refer to television channels by the oligarchs who own them: “Akhmetov’s channel”, “Firtash’s channel” and so on. Anyone who believes they don’t have state officials in their pockets deserves a Nobel prize for naivety. Oh yes, and several of them also have private security forces.

How does one start transforming such a deformed state? Where the ancient Romans asked “who will guard the guardians?”, the question for modern Ukraine is “who will prosecute the prosecutors?” The current plan is to set up an independent anti-corruption bureau, with its own investigative and prosecuting powers. The forces of resistance are strong, and can be nasty. One MP, who is working on the closely related anti-monopoly proposals, told me she was personally threatened (“I’m afraid something might happen to one of your relatives when they are crossing the street.”)

I hear two novel D-words: de-shadowing and de-oligarchisation. De-shadowing means trying to bring some of the grey economy out of those shadows, to help fill a giant hole in the public finances. President Petro Poroshenko told our visiting study group from the European Council on Foreign Relations that Russian aggression has cost Ukraine about 25% of its industrial output. Even if it receives the promised international financial support package of $40bn over five years, Kiev is barely able to pay its bills – including military costs estimated at $5m-$10m a day – and service its debts. But while bureaucrats are so badly paid, many of them will go on taking bribes, rather than, say, collecting taxes. Only a state that can raise the money to pay its civil servants properly will be able to raise the money to, er, pay its civil servants properly. That’s just one of many Ukrainian catch-22s.

De-oligarchisation – a tongue-twister only to be spoken when entirely sober – means what it says. But how? Recently, one of the top oligarchs, Kolomoisky, was taken down a peg, being removed as a provincial governor by Poroshenko – who is, of course, himself an oligarch. Yet Kolomoisky remains richer and more powerful than any feudal baron. To make things still more complicated, he has actually used his clan resources to help protect his region and neighbouring ones against potential Russian separatist destabilisation.

I can only offer a few glimpses from this under-reported Ukrainian home front here: not a fairytale simplistic narrative, but the messy, uncomfortable facts. Even if there were no war in the east, the obstacles to building a better Ukraine would be immense. To be sure, that war has released reserves of popular energy. Society has mobilised. On the streets, you encounter volunteers rattling collection tins for the army, and humanitarian support for the more than 1 million internally displaced people. War has united the larger part of the country, even as it has divided its eastern end. Not for the first time in history, a nation is being forged in conflict.

Yet the human, economic and political cost of that war is crippling, and it could get worse. For we must understand that Putin is unlikely to be content with just a “frozen conflict” in eastern Ukraine – which many here in Kiev privately describe as the least worst option for now. He wants a simmering conflict, one that ensures the whole of Ukraine remains a weak, unstable, dysfunctional state.

Our job, as Europeans, is to prevent him achieving that objective. Yet at best, we can only create the conditions in which the Ukrainians themselves may seize the opportunity created by this crisis, and build a new Ukraine. The rest is up to them.